Section 33B of the Income Tax Act, 1961 – Rehabilitation allowance

Note 1: For the purpose of this section, “industrial undertaking” refers to any undertaking whose primary activity is the generation or distribution of electricity or any other type of power, the construction of ships, the manufacturing or processing of goods, or mining.

Section 33B of the Income Tax Act, 1961 provides for rehabilitation allowance in certain cases. When an industrial undertaking operating in India is discontinued due to significant damage to or destruction of any machinery, building, furniture or plant that belongs to the assessee and is utilised for business purposes as a direct consequence of –

1. a natural disaster such as a flood, typhoon, hurricane, cyclone, earthquake, or other
2. a riot or other civil disturbance
3. an accidental explosion or fire
4. an action by an enemy or action taken when combating an enemy (with or without a declaration of war)

and, subsequently, if the business is re-established, reconstructed, or revived by the assessee at any time before the passage of three years from the end of such previous year, he shall be entitled to a deduction for the previous year in which the business is so re-established, reconstructed, or revived of an amount by way of rehabilitation allowance equal to 60% of the amount of the deduction permitted to him under clause (iii) of Section 32 (1) regarding the machinery, building, furniture or plant that has been damaged or destroyed.

Note 2: In the assessment year beginning on April 1, 1985, or any subsequent assessment year, no deduction shall be permitted under this section.